There’s a 40% chance that a small business will file a property or liability loss claim within the next 10 years. With chances that high, businesses need all the protection they can get.
Without a business insurance policy, owners would need to pay out-of-pocket for any damage, injury, and legal claims against the company. There is no single general policy that fits every business and it’s important to understand what affects the type of insurance coverage each business needs.
What Is a Business Insurance Policy?
Business insurance is business protection.
It’s a range of policy options that protect a company from loss and liability. Coverage depends on the size of the company, the number of employees, handled materials, and vehicles in operation. Every company is different and the insurance policy must be personalized to fit the business.
How Does It Work?
The business signs a contract with an insurance company to pay a fixed premium in exchange for protection. Protection is financial compensation in the event of an accident or disaster.
When there’s a loss, the business files a claim with their insurance company. An adjuster visits the property to assess the damages. The company receives compensation for the loss minus the deductible.
Why Do Businesses Need Insurance?
Let’s say there’s a fire that burns and damages a building on company property and workers are injured. Without insurance, the business is liable for all loss. This could put the company out of business.
State laws determine business insurance requirements. Below are general types of coverage that businesses have in the U.S.:
This protects company property from loss or damage from disasters such as fire, water, hail, wind, smoke, and vandalism. U.S. commercial property/casualty insurance premiums were $274.5 billion in 2017 and were expected to increase to $331.5 billion by 2021.
Contractors can get a policy under property protection too. Builder’s risk insurance falls under property policy that protects structures during construction
Workers’ compensation is for workers injured on the job. This compensates workers for lost wages and medical costs when they’re injured while working.
Workers’ compensation also protects the company from being sued by the injured worker. If you have W2 employees, it’s a requirement in all states and there are repercussions for non-compliance.
Liability insurance is a necessity for every small business. This type of insurance protects businesses from claims due to normal business operations and provides coverage for property damage, bodily injury, defense costs, and personal or advertising injury.
This protects against loss from malpractice, negligence, errors, and misrepresentation and general liability does not cover such claims. This type of insurance is essential for physicians, lawyers, and accountants.
Does your business sell or make products? Product liability is for businesses that manufacture, distribute, wholesale, and retail products.
Product liability protects a business if a defective product causes injury or other damages to a third party.
Need an Insurance Policy for Your Business?
Every business, even home-based, benefits from having the added protection from a business insurance policy. Business insurance not only saves you from loss and lawsuits but it could save you from losing everything.
Running your own business or looking to start one? Check out the business section on our blog for more helpful tips.